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Jindals to merge steel companies

Mumbai, Oct. 20: Sparking the first major consolidation in the steel industry, the Sajjan Jindal group is planning to consolidate its steel business through a merger of Jindal Vijaynagar Steel Ltd (JVSL) and Jindal Iron & Steel Company Ltd (Jisco).

The Bellary-based JVSL, which is listed on the Bombay Stock exchange, said the board will meet on October 22 to “approve in principle the restructuring envisaging consolidation of its steel business with that of Jindal Iron & Steel Company.”

The board will also consider the appointment of consultants and valuers to evaluate the proposal in detail of the prepayment and settlement of outstanding dues of Rs 383.44 crore to some of the unsecured foreign lenders subject to compliance of certain terms and conditions.

A few months back, the Sajjan Jindal Group had announced its plan to set up a holding company for its group ventures. A private investment company of the promoters — Jindal South West (so named because Sajjan Jindal firms are located in south and west India) — is set to emerge as the holding company in which family members will have equal stakes.

The holding firm was for the two companies — Jindal Iron & Steel Company and Jindal Vijaynagar Steel. After the setting up of the holding company, the group would move ahead with the merger of JVSL and Jisco. The merger is expected to start in about a year, the group had then indicated.

The merger, which is taking place when the industry is going through a cyclical uptrend, will spawn an over Rs 4,000 crore integrated steel giant with a broad array of products from HR coils to galvanised steel. The group had appointed RSM & Co as adviser. RSM is also the adviser to the plan to split Jisco vertically.

In an interview to a business daily a couple of months ago, Sajjan Jindal had indicated that the holding company would help reduce cross-holdings and bring out a clear picture of the group's holding structure.

The plans are being worked out by the group, which may be announced on October 22. The group has initiated the exercise by deciding to vertically split Jisco into a core steel company and an investment company.

Later, all the investment firms — Sun Investments, Gagan Trading Company and Vrindavan Services — will be merged into Jindal South West, which was floated last year with an equity base of about Rs 10 lakh.

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